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Pell Costs Explode

Pell Costs Explode
December 11, 2009

Obama administration officials confirmed on Thursday that unexpectedly strong demand for Pell Grants would sharply increase government spending on its primary need-based student aid program, requiring an extra $18 billion over the next three years. While such shortfalls are common in programs like Pell -- which act like entitlement programs and expand to meet students' need -- this dwarfs previous gaps.

Administration officials and Democratic Congressional aides played down the significance of the budget-busting Pell numbers, expressing confidence that lawmakers would find a way to fill the gap without damage to other education programs or other administration priorities. The biggest question mark for many college officials: whether the extra dollars to keep Pell whole in the short term would threaten the $80-plus billion that the White House and Congressional Democrats hope to direct to Pell, community colleges, and other priorities in a pending student loan reform bill.

No, the Student Aid and Fiscal Responsibility Act won't be threatened, Hill staff members said. But they and administration officials were tight-lipped about how they might come up with the extra funds to close the projected shortfall. "We're working with Congress on options," a White House official said on background, but he declined to say what they were.

Congressional negotiators agreed this week on a compromise spending bill for education and other programs for the current 2010 fiscal year, and while that legislation is still pending in both houses of Congress, undoing that agreement to try to find $18 billion for Pell seems unlikely. A second broad spending bill, this one for defense programs, is expected by year's end, and federal budget experts say it may include some funds designed to promote jobs and boost the economy. Since lawmakers concluded that $40 billion in Pell Grant funds deserved a place in the economic stimulus legislation they passed in February, it is certainly conceivable that they might make the same decision a second time.

The Pell funds could be added to the emergency supplemental appropriations legislation that Congress typically considers each spring between annual budget cycles, usually to fund disaster relief, expanded military operations and other unexpected costs. Or administration could hold off and seek to close the shortfall in President Obama's fiscal 2011 budget and an appropriations bill in the 2011 budget cycle that will begin next spring.

The Associated Press first reported on the Pell shortfall Thursday; word of the gap leaked out after a highly unusual meeting last week involving Education Secretary Arne Duncan, Peter Orszag, the president's budget director, and the chairs of the House and Senate education and appropriations committees.

The White House staff member attributed the booming costs of the Pell program (which administration officials foreshadowed when they released a revision to their 2010 budget plan in August, projecting growing Pell spending) to the traditional boom in the number of students going to college in a down economy, and to greatly increased eligibility for the grants because individuals' financial situations had worsened and the maximum grant increased to $5,350 this year.

"Across the board, a lot of government programs of aid and assistance are stressed" during an economic downturn, the White House aide said.

But as some higher education analysts point out, the vast expansion of the Pell program is unlikely to be a temporary phenomenon. Jason Delisle, who directs the federal education budget project at the New America Foundation, wrote on the foundation's Higher Ed Watch blog Thursday that with the planned expansion of Pell Grants in the student loan reform bill, Congress and the administration are not just facing a $32 billion price tag for Pell in 2011 (double 2008's $15 billion); they are looking at spending $30 billion a year permanently starting in 2012.

So even if the White House and Congressional Democrats dig themselves out of the current Pell hole in one of the forthcoming appropriations bills, that may be only a temporary fix.

"[T]he cause for concern isn’t really a 'shortfall.' " he writes. "It is the $30-plus billion annually for Pell Grants as far as the eye can see. Many people will surely cheer such a large funding commitment to the program, but budget hawks will no doubt bristle at these figures, which to them, show a spending program out of control."

 

 

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